Company Quick10K Filing
Quick10K
USD Partners
10-Q 2019-09-30 Quarter: 2019-09-30
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
8-K 2019-11-06 Earnings, Exhibits
8-K 2019-10-25 Regulation FD, Exhibits
8-K 2019-08-05 Earnings, Exhibits
8-K 2019-07-24 Regulation FD, Exhibits
8-K 2019-05-06 Earnings, Exhibits
8-K 2019-04-26 Regulation FD, Exhibits
8-K 2019-03-06 Earnings, Exhibits
8-K 2019-01-31 Regulation FD, Exhibits
8-K 2018-11-05 Earnings, Exhibits
8-K 2018-11-02 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-10-25 Regulation FD, Exhibits
8-K 2018-08-06 Earnings, Exhibits
8-K 2018-07-27 Regulation FD, Exhibits
8-K 2018-06-25 Regulation FD
8-K 2018-05-07 Earnings, Exhibits
8-K 2018-04-26 Regulation FD, Exhibits
8-K 2018-04-06 Regulation FD
8-K 2018-03-08 Earnings, Exhibits
8-K 2018-02-14 Regulation FD
8-K 2018-02-01 Regulation FD, Exhibits
UNP Union Pacific 112,122
CSX CSX 53,518
NSC Norfolk Southern 45,866
CP Canadian Pacific Railway 32,887
KSU Kansas City Southern 12,532
WAB Westinghouse Air Brake 10,736
GWR Genesee & Wyoming 6,314
TRN Trinity Industries 2,154
GBX Greenbrier Companies 748
RAIL Freightcar America 54
USDP 2019-09-30
Part I-Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 6. Exhibits
EX-31.1 usdp2019093010qex311.htm
EX-31.2 usdp2019093010qex312.htm
EX-32.1 usdp2019093010qex321.htm
EX-32.2 usdp2019093010qex322.htm

USD Partners Earnings 2019-09-30

USDP 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 usdp2019093010-q.htm 10-Q USD PARTNERS 9-30-2019 Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number 001-36674 
USD PARTNERS LP
(Exact Name of Registrant as Specified in Its Charter)
Delaware
 
30-0831007
(State or Other Jurisdiction of Incorporation
or Organization)
 
(I.R.S. Employer
Identification No.)
811 Main Street, Suite 2800
Houston, Texas 77002
(Address of Principal Executive Offices) (Zip Code)
(Registrant’s Telephone Number, Including Area Code): (281) 291-0510
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Units Representing Limited Partner Interests
USDP
New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    YES  x    NO  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
       Large accelerated filer ¨
Accelerated filer x
       Non-accelerated filer ¨
Smaller reporting company x
 
Emerging growth company x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   YES  ¨    NO  x
As of November 1, 2019 there were 24,411,514 common units, 2,092,709 subordinated units and 461,136 general partner units outstanding.
 




TABLE OF CONTENTS
Unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q, or this “Report,” to “USD Partners,” “USDP,” “the Partnership,” “we,” “us,” “our,” or like terms refer to USD Partners LP and its subsidiaries.
Unless the context otherwise requires, all references in this Report to (i) “our general partner” refer to USD Partners GP LLC, a Delaware limited liability company; (ii) “USD” refers to US Development Group, LLC, a Delaware limited liability company, and where the context requires, its subsidiaries; (iii) “USDG” and “our sponsor” refer to USD Group LLC, a Delaware limited liability company and currently the sole direct subsidiary of USD; (iv) “Energy Capital Partners” refers to Energy Capital Partners III, LP and its parallel and co-investment funds and related investment vehicles; and (v) “Goldman Sachs” refers to The Goldman Sachs Group, Inc. and its affiliates.
Cautionary Note Regarding Forward-Looking Statements
This Report includes forward-looking statements, which are statements that frequently use words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “position,” “projection,” “should,” “strategy,” “target,” “will” and similar words. Although we believe that such forward-looking statements are reasonable based on currently available information, such statements involve risks, uncertainties and assumptions and are not guarantees of performance. Future actions, conditions or events and future results of operations may differ materially from those expressed in these forward-looking statements. Any forward-looking statement made by us in this Report speaks only as of the date on which it is made, and we undertake no obligation to publicly update any forward-looking statement. Many of the factors that will determine these results are beyond our ability to control or predict. Specific factors that could cause actual results to differ from those in the forward-looking statements include: (1) changes in general economic conditions; (2) the effects of competition, in particular, by pipelines and other terminalling facilities; (3) shut-downs or cutbacks at upstream production facilities, refineries or other related businesses; (4) the supply of, and demand for, terminalling services for crude oil and biofuels; (5) the price and availability of debt and equity financing; (6) actions by third parties, including customers, lenders and our sponsors; (7) hazards and operating risks that may not be covered fully by insurance; (8) disruptions due to equipment interruption or failure at our facilities or third-party facilities on which our business is dependent; (9) natural disasters, weather-related delays, casualty losses and other matters beyond our control; (10) changes in laws or regulations to which we are subject, including compliance with environmental and operational safety regulations, that may increase our costs; and (11) our ability to successfully identify and finance acquisitions and other growth opportunities. For additional factors that may affect our results, see “Risk Factors” and the other information included elsewhere in this Report and our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, which is available to the public over the Internet at the website of the U.S. Securities and Exchange Commission, or SEC, (www.sec.gov) and at our website (www.usdpartners.com).



i



PART I—FINANCIAL INFORMATION 
Item 1.     Financial Statements
USD PARTNERS LP
CONSOLIDATED STATEMENTS OF INCOME
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
(unaudited; in thousands of US dollars, except per unit amounts)
Revenues
 
 
 
 
 
 
 
Terminalling services
$
23,709

 
$
22,070

 
$
63,437

 
$
66,586

Terminalling services — related party
4,459

 
5,715

 
15,622

 
15,414

Fleet leases — related party
984

 
984

 
2,951

 
2,951

Fleet services
50

 
80

 
158

 
505

Fleet services — related party
227

 
227

 
682

 
682

Freight and other reimbursables
272

 
510

 
973

 
2,754

Freight and other reimbursables — related party
193

 

 
254

 
4

Total revenues
29,894

 
29,586

 
84,077

 
88,896

Operating costs
 
 
 
 
 
 
 
Subcontracted rail services
3,689

 
3,674

 
10,953

 
10,047

Pipeline fees
5,411

 
5,267

 
15,374

 
16,109

Freight and other reimbursables
465

 
510

 
1,227

 
2,758

Operating and maintenance
2,481

 
2,686

 
8,202

 
7,540

Operating and maintenance — related party
2,471

 

 
2,471

 

Selling, general and administrative
2,940

 
2,463

 
8,139

 
7,912

Selling, general and administrative — related party
1,406

 
1,893

 
6,081

 
5,640

Depreciation and amortization
5,300

 
5,271

 
15,317

 
15,807

Total operating costs
24,163

 
21,764

 
67,764

 
65,813

Operating income
5,731

 
7,822

 
16,313

 
23,083

Interest expense
3,005

 
2,827

 
9,174

 
8,025

Loss (gain) associated with derivative instruments
220

 
(413
)
 
1,966

 
(1,823
)
Foreign currency transaction loss (gain)
35

 
(89
)
 
237

 
(183
)
Other expense (income), net
(49
)
 
(1
)
 
(52
)
 
71

Income before income taxes
2,520

 
5,498

 
4,988

 
16,993

Provision for (benefit from) income taxes
414

 
(430
)
 
612

 
(2,247
)
Net income
$
2,106

 
$
5,928

 
$
4,376

 
$
19,240

Net income attributable to limited partner interests
$
1,888

 
$
5,719

 
$
3,817

 
$
18,616

Net income per common unit (basic and diluted)
$
0.08

 
$
0.21

 
$
0.15

 
$
0.72

Weighted average common units outstanding
24,411

 
21,915

 
23,965

 
21,480

Net income per subordinated unit (basic and diluted)
$
0.08

 
$
0.21

 
$
0.13

 
$
0.71

Weighted average subordinated units outstanding
2,093

 
4,185

 
2,476

 
4,569



The accompanying notes are an integral part of these consolidated financial statements.
1




USD PARTNERS LP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
(unaudited; in thousands of US dollars)
Net income
$
2,106

 
$
5,928

 
$
4,376

 
$
19,240

Other comprehensive income (loss) — foreign currency translation
(652
)
 
997

 
1,903

 
(1,791
)
Comprehensive income
$
1,454

 
$
6,925

 
$
6,279

 
$
17,449



The accompanying notes are an integral part of these consolidated financial statements.
2




USD PARTNERS LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Nine Months Ended September 30,
 
2019
 
2018
 
(unaudited; in thousands of US dollars)
Cash flows from operating activities:
 
 
 
Net income
$
4,376

 
$
19,240

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
15,317

 
15,807

Loss (gain) associated with derivative instruments
1,966

 
(1,823
)
Settlement of derivative contracts
1

 
(38
)
Unit based compensation expense
4,533

 
4,333

Deferred income taxes
(299
)
 
(3,269
)
Other
915

 
719

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
1,511

 
(3,459
)
Accounts receivable — related party
(1,054
)
 
2,450

Prepaid expenses and other assets
72

 
372

Other assets — related party
(329
)
 
59

Accounts payable and accrued expenses
(411
)
 
272

Accounts payable and accrued expenses — related party
2,429

 
(2,061
)
Deferred revenue and other liabilities
5,590

 
(403
)
Deferred revenue — related party
(462
)
 
17

Net cash provided by operating activities
34,155

 
32,216

Cash flows from investing activities:
 
 
 
Additions of property and equipment
(7,072
)
 
(443
)
Proceeds from the sale of assets

 
236

Net cash used in investing activities
(7,072
)
 
(207
)
Cash flows from financing activities:
 
 
 
Distributions
(30,994
)
 
(29,573
)
Payments for deferred financing costs
(7
)
 

Vested phantom units used for payment of participant taxes
(1,826
)
 
(1,350
)
Proceeds from long-term debt
28,000

 
20,000

Repayments of long-term debt
(21,000
)
 
(21,000
)
Other financing activities
(13
)
 

Net cash used in financing activities
(25,840
)
 
(31,923
)
Effect of exchange rates on cash
497

 
(679
)
Net change in cash, cash equivalents and restricted cash
1,740

 
(593
)
Cash, cash equivalents and restricted cash  beginning of period
12,383

 
13,788

Cash, cash equivalents and restricted cash  end of period
$
14,123

 
$
13,195


The accompanying notes are an integral part of these consolidated financial statements.
3




USD PARTNERS LP
CONSOLIDATED BALANCE SHEETS

 
September 30, 2019
 
December 31, 2018
 
(unaudited; in thousands of US dollars, except unit amounts)
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
6,479

 
$
6,439

Restricted cash
7,644

 
5,944

Accounts receivable, net
3,653

 
5,132

Accounts receivable — related party
1,689

 
624

Prepaid expenses
1,435

 
2,115

Other current assets
404

 
634

Other current assets — related party
468

 
79

Total current assets
21,772

 
20,967

Property and equipment, net
148,544

 
145,308

Intangible assets, net
77,250

 
86,705

Goodwill
33,589

 
33,589

Operating lease right-of-use assets
13,083

 

Other non-current assets
764

 
631

Other non-current assets — related party
35

 
95

Total assets
$
295,037

 
$
287,295

 
 
 
 
LIABILITIES AND PARTNERS’ CAPITAL
 
 
 
Current liabilities
 
 
 
Accounts payable and accrued expenses
$
4,120

 
$
3,464

Accounts payable and accrued expenses — related party
2,899

 
460

Deferred revenue
6,016

 
2,921

Deferred revenue — related party
1,464

 
1,885

Operating lease liabilities, current
5,075

 

Other current liabilities
3,765

 
2,804

Total current liabilities
23,339

 
11,534

Long-term debt, net
213,444

 
205,581

Deferred income tax liabilities, net
70

 
360

Operating lease liabilities, non-current
8,275

 

Other non-current liabilities
2,828

 
356

Total liabilities
247,956

 
217,831

Commitments and contingencies

 

Partners’ capital
 
 
 
Common units (24,411,280 and 21,916,024 outstanding at September 30, 2019 and December 31, 2018, respectively)
67,240

 
107,903

Class A units (38,750 outstanding at December 31, 2018)

 
1,018

Subordinated units (2,092,709 and 4,185,418 outstanding at September 30, 2019 and December 31, 2018, respectively)
(21,941
)
 
(39,723
)
General partner units (461,136 outstanding at September 30, 2019 and
December 31, 2018)
2,888

 
3,275

Accumulated other comprehensive loss
(1,106
)
 
(3,009
)
Total partners’ capital
47,081

 
69,464

Total liabilities and partners’ capital
$
295,037

 
$
287,295


The accompanying notes are an integral part of these consolidated financial statements.
4




USD PARTNERS LP
CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

 
Three Months Ended September 30,
 
2019
 
2018
 
Units
 
Amount
 
Units
 
Amount
 
(unaudited; in thousands of US dollars, except unit amounts)
Common units
 
 
 
 
 
 
 
Beginning balance at July 1,
24,410,226

 
$
73,424

 
21,914,224

 
$
114,822

Conversion of units

 

 

 

Common units issued for vested phantom units
1,054

 
(5
)
 
1,135

 
(4
)
Net income

 
1,739

 

 
4,794

Unit based compensation expense

 
1,421

 

 
1,313

Distributions

 
(9,339
)
 

 
(8,143
)
Ending balance at September 30,
24,411,280

 
67,240

 
21,915,359

 
112,782

Class A units
 
 
 
 
 
 
 
Beginning balance at July 1,

 

 
38,750

 
950

Conversion of units

 

 

 

Net income

 

 

 
9

Unit based compensation expense

 

 

 
43

Forfeited units

 

 

 

Distributions

 

 

 
(15
)
Ending balance at September 30,

 

 
38,750

 
987

Subordinated units
 
 
 
 
 
 
 
Beginning balance at July 1,
2,092,709

 
(21,290
)
 
4,185,418

 
(37,797
)
Conversion of units

 

 

 

Net income

 
149

 

 
916

Unit based compensation expense

 

 

 

Distributions

 
(800
)
 

 
(1,555
)
Ending balance at September 30,
2,092,709

 
(21,941
)
 
4,185,418

 
(38,436
)
General Partner units
 
 
 
 
 
 
 
Beginning balance at July 1,
461,136

 
3,008

 
461,136

 
95

Capital contribution

 

 

 
3,366

Net income

 
218

 

 
209

Unit based compensation expense

 

 

 

Distributions

 
(338
)
 

 
(267
)
Ending balance at September 30,
461,136

 
2,888

 
461,136

 
3,403

Accumulated other comprehensive income (loss)
 
 
 
 
 
 
 
Beginning balance at July 1,
 
 
(454
)
 
 
 
(954
)
Cumulative translation adjustment
 
 
(652
)
 
 
 
997

Ending balance at September 30,
 
 
(1,106
)
 
 
 
43

Total partners’ capital at September 30,
 
 
$
47,081

 
 
 
$
78,779



The accompanying notes are an integral part of these consolidated financial statements.
5




USD PARTNERS LP
CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

 
Nine Months Ended September 30,
 
2019
 
2018
 
Units
 
Amount
 
Units
 
Amount
 
(unaudited; in thousands of US dollars, except unit amounts)
Common units
 
 
 
 
 
 
 
Beginning balance at January 1,
21,916,024

 
$
107,903

 
19,537,971

 
$
136,645

Conversion of units
2,131,459

 
(19,631
)
 
2,131,459

 
(18,245
)
Common units issued for vested phantom units
363,797

 
(1,826
)
 
245,929

 
(1,350
)
Net income

 
3,506

 

 
15,337

Unit based compensation expense

 
4,154

 

 
3,753

Distributions

 
(26,866
)
 

 
(23,358
)
Ending balance at September 30,
24,411,280

 
67,240

 
21,915,359

 
112,782

Class A units
 
 
 
 
 
 
 
Beginning balance at January 1,
38,750

 
1,018

 
82,500

 
1,468

Conversion of units
(38,750
)
 
(1,018
)
 
(38,750
)
 
(674
)
Net income

 

 

 
33

Unit based compensation expense

 
14

 

 
144

Forfeited units

 

 
(5,000
)
 
73

Distributions

 
(14
)
 

 
(57
)
Ending balance at September 30,

 

 
38,750

 
987

Subordinated units
 
 
 
 
 
 
 
Beginning balance at January 1,
4,185,418

 
(39,723
)
 
6,278,127

 
(55,237
)
Conversion of units
(2,092,709
)
 
20,637

 
(2,092,709
)
 
18,919

Net income

 
311

 

 
3,246

Unit based compensation expense

 
2

 

 
26

Distributions

 
(3,168
)
 

 
(5,390
)
Ending balance at September 30,
2,092,709

 
(21,941
)
 
4,185,418

 
(38,436
)
General Partner units
 
 
 
 
 
 
 
Beginning balance at January 1,
461,136

 
3,275

 
461,136

 
180

Capital contribution

 

 

 
3,366

Net income

 
559

 

 
624

Unit based compensation expense

 

 

 
1

Distributions

 
(946
)
 

 
(768
)
Ending balance at September 30,
461,136

 
2,888

 
461,136

 
3,403

Accumulated other comprehensive income (loss)
 
 
 
 
 
 
 
Beginning balance at January 1,
 
 
(3,009
)
 
 
 
1,834

Cumulative translation adjustment
 
 
1,903

 
 
 
(1,791
)
Ending balance at September 30,
 
 
(1,106
)
 
 
 
43

Total partners’ capital at September 30,
 
 
$
47,081

 
 
 
$
78,779



The accompanying notes are an integral part of these consolidated financial statements.
6




USD PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
USD Partners LP and its consolidated subsidiaries, collectively referred to herein as we, us, our, the Partnership and USDP, is a fee-based, growth-oriented master limited partnership formed in 2014 by US Development Group, LLC, or USD, through its wholly-owned subsidiary, USD Group LLC, or USDG. We were formed to acquire, develop and operate midstream infrastructure and complementary logistics solutions for crude oil, biofuels and other energy-related products. We generate substantially all of our operating cash flows from multi-year, take-or-pay contracts with primarily investment grade customers, including major integrated oil companies, refiners and marketers. Our network of crude oil terminals facilitate the transportation of heavy crude oil from Western Canada to key demand centers across North America. Our operations include railcar loading and unloading, storage and blending in onsite tanks, inbound and outbound pipeline connectivity, truck transloading, as well as other related logistics services. We also provide our customers with leased railcars and fleet services to facilitate the transportation of liquid hydrocarbons and biofuels by rail. We do not generally take ownership of the products that we handle, nor do we receive any payments from our customers based on the value of such products. We may on occasion enter into buy-sell arrangements in which we take temporary title to commodities while in our terminals. We expect such arrangements to be at fixed prices where we do not take commodity price exposure.
Basis of Presentation
Our accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, for interim consolidated financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and disclosures required by GAAP for complete consolidated financial statements. In the opinion of our management, they contain all adjustments, consisting only of normal recurring adjustments, which our management considers necessary to present fairly our financial position as of September 30, 2019, our results of operations for the three and nine months ended September 30, 2019 and 2018, and our cash flows for the nine months ended September 30, 2019 and 2018. We derived our consolidated balance sheet as of December 31, 2018 from the audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. Our results of operations for three and nine months ended September 30, 2019 and 2018 should not be taken as indicative of the results to be expected for the full year due to fluctuations in the supply of and demand for crude oil and biofuels, timing and completion of acquisitions, if any, changes in the fair market value of our derivative instruments and the impact of fluctuations in foreign currency exchange rates. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto presented in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
Foreign Currency Translation
We conduct a substantial portion of our operations in Canada, which we account for in the local currency, the Canadian dollar. We translate most Canadian dollar denominated balance sheet accounts into our reporting currency, the U.S. dollar, at the end of period exchange rate, while most income statement accounts are translated into our reporting currency based on the average exchange rate for each monthly period. Fluctuations in the exchange rate between the Canadian dollar and the U.S. dollar can create variability in the amounts we translate and report in U.S. dollars.
Within these consolidated financial statements, we denote amounts denominated in Canadian dollars with “C$” immediately prior to the stated amount.
US Development Group, LLC
USD and its affiliates are engaged in designing, developing, owning and managing large-scale multi-modal logistics centers and energy-related infrastructure across North America. USD is the indirect owner of our general partner through its direct ownership of USDG and is currently owned by Energy Capital Partners, Goldman Sachs and certain of USD’s management team members.


7



Comparative Amounts
We have made certain reclassifications to the amounts reported in the prior year to conform with the current year presentation. None of these reclassifications have an impact on our operating results, cash flows or financial position.
We adopted the provisions of ASC 842 Leases on January 1, 2019. We elected to implement the provisions of the new standard to our existing leases by recognizing and measuring lease assets and liabilities on our balance sheet as of January 1, 2019, as well as any cumulative-effect adjustment to the opening balance of Partners Capital. Refer to Note 2. Recent Accounting Pronouncements and Note 7. Leases for further discussion.

2. RECENT ACCOUNTING PROUNOUNCEMENTS
Recently Adopted Accounting Pronouncements
Accounting for Nonemployee Unit based Compensation (ASU 2018-07)
In June 2018, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update No. 2018-07, or ASU 2018-07, which amends the Accounting Standards Codification, or ASC, Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The provisions of this standard specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. We adopted the provisions of ASU 2018-07 prospectively on January 1, 2019, which affected the method we used to value the phantom units we granted to our directors and consultants domiciled in the United States. In periods prior to our adoption of ASU 2018-07, we were required to revalue the outstanding phantom units granted to these individuals each reporting period. Pursuant to the requirements of ASU 2018-07 and under the provisions of ASC Topic 718, these phantom units are now valued at the grant date fair value, consistent with the method we use to value phantom units granted to employees that are domiciled in the United States.
Leases (ASC 842)
In February 2016, the FASB issued Accounting Standards Update No. 2016-02, or ASU 2016-02, which created ASC Topic 842 Leases, to require balance sheet recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. The standard also expanded the disclosure requirements for lessors with respect to their leasing activities. In July 2018, the FASB issued ASU 2018-11, to provide another transition method in addition to the existing transition method, allowing entities to initially apply the new standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Additionally, the FASB has issued other Accounting Standards Updates to clarify application of the guidance in the original standard and to provide practical expedients for applying the standard, all of which were effective upon adoption. The pronouncement was effective for years beginning after December 15, 2018, and early adoption was permitted.
We adopted the provisions of ASC 842 on January 1, 2019. This standard requires us to recognize right-of-use assets and lease liabilities on our consolidated balance sheet for identified property that is subject to operating lease agreements for which we are considered a lessee. We elected to adopt this standard by applying the additional transition method set forth in ASU 2018-11, whereby we implement the provisions of the new standard to our existing leases by recognizing and measuring lease assets and liabilities on our balance sheet as of January 1, 2019, as well as a cumulative-effect adjustment to the opening balances of Partners’ Capital. Consequently, our reporting of leases for the prior year continues to be provided in accordance with ASC Topic 840, which was effective during that period. We elected the package of practical expedients permitted under the transition guidance within ASC 842, which, among other things, allowed us to carry forward our historical lease classification without the need to re-evaluate such classification pursuant to the provisions of ASC 842. 
We determine the classification of our leases as operating, financing or sales-type leases based on the criteria set forth in ASC 842 that considers whether a lease is economically similar to the purchase of a nonfinancial asset. We have adopted as our accounting policy the definition of “substantially all” of the fair value of the underlying asset to


8



mean 90% or greater and a “major part” of the remaining economic life to mean 75% or greater in performing our classification assessment. We exclude variable lease payments that are based on performance or use from our lease classification determination. We include the exercise price of a purchase option when reasonable certainty exists that we will exercise the option. We also include termination penalties unless it is reasonably certain that we will not exercise any option to terminate the lease, and therefore will not incur the penalty. Lastly, we also include any residual value guarantees that we provided to lessors in our classification determination.
Our adoption of ASC 842 required us to recognize lease assets and lease liabilities for all leases where we are the lessee and present them on our balance sheet, which did not affect our consolidated statements of income, consolidated statement of cash flows or consolidated statements of partners' capital. Upon adoption we recognized a right-of-use lease asset and corresponding liability of $17.3 million on our consolidated balance sheet. Additionally, our adoption of ASC 842 did not affect our accounting for leases where we are the lessor.
Lessee Accounting
We lease assets from third parties for use in our operations, which primarily include railcars, buildings, storage tanks, equipment, offices, railroad track and land. The general terms of our lease agreements require monthly payments in advance, in arrears or upon receipt, some of which include variable payments attributable to index-based rate escalations and freight associated with railcar returns. A majority of our leases do not include renewal options, or rights to early termination of the lease agreements. Additionally, our leases do not include residual value guarantees, nor do they impose any significant covenants or restrictions on us. As discussed below under Lessor Accounting, we effectively sublease all of our leased railcars to customers under terms similar to the terms of our lease agreements with the railcar manufacturing and finance companies from whom we lease the railcars. We also lease a storage tank from a third party provider of crude oil storage that we sublease to a customer of our Stroud terminal.
We have elected as an accounting policy not to apply the recognition requirements of ASC 842 to short-term leases for all classes of assets underlying our leases. As a result, we recognize the lease payments we make as expense in our consolidated statements of income over the lease term, regardless of the underlying class of asset being leased. We define a short-term lease as a lease that at the commencement date has a term of 12 months or less and does not include an option to purchase the underlying asset that we are reasonably certain to exercise.
We deem a contract to be a lease when the terms of the agreement indicate we have the right to control the use of an identified asset for a period of time in exchange for consideration. We establish our right to control the use of an identified asset when the contract terms set forth our right to obtain substantially all of the economic benefits from use of the identified asset, or to direct its use throughout the contract period. We consider substantially all of the economic benefits to mean 90% or more of the utility of the identified asset.
We have elected to apply the portfolio approach to account for our railcar leases due to our expectation that this method would not significantly differ from an individual lease approach. Additionally, we have elected to use the practical expedient that allows us not to separate amounts of contract consideration between lease and non-lease components. Non-lease components of our agreements include maintenance of property, common area costs such as cleaning and landscape services and reimbursement of the suppliers’ insurance, taxes or administrative costs.
We determine the discount rate for our leases by estimating a borrowing rate we would pay on a collateralized basis over the term of the underlying lease, based on our creditworthiness and the interest rate environment at the time we enter into the lease. We establish our credit quality by performing a synthetic credit analysis based on operational, liquidity and solvency metrics, which are weighted to produce an estimated rating. We then develop an interest rate curve for various periods of time by applying an adjustment factor to the risk free rates as established from yields on U.S. Treasury securities. We utilize this interest rate curve to establish an approximate discount rate based upon the term of the underlying lease.
We determine our right-of-use assets based on the initial measurement amount of the lease liability, as discussed below, increased by any prepayments that we make to the lessor at or before the lease commencement date and any initial direct costs we may incur, reduced by any incentive amounts we may receive.


9



We measure our lease liabilities based upon the discounted present value of the payment amounts we expect to make over the noncancellable terms of the underlying leases. We exclude variable lease payments that are based on performance or use in our measurement of the right of use assets and liabilities. We include in our measurement of the right of use assets and lease liabilities the exercise price of purchase options when reasonable certainty exists that we will exercise the option and any termination penalties when reasonable certainty exists that we will exercise an option to terminate the lease. We also include any residual value guarantees provided to lessors to the extent that we consider the likelihood we will have to pay the lessor at the end of the lease term for a deficiency to be probable.
Over the lease term, we amortize the right-of-use asset and record interest expense on the lease liability recorded at commencement of the lease. Our income statement recognition of the expense is dependent on whether the lease is classified as an operating, direct financing, or sales-type lease. We recognize amortization expense and interest expense associated with operating leases as a single item of expense in our consolidated statements of income. We recognize amortization expense and interest expense associated with any direct financing and sales-type leases as separate items of expense within our consolidated statements of income.
We present all leases, where we are the lessee, on our balance sheet subject to the practical expedients we have elected and capitalization limitations we have established.
Lessor Accounting
We effectively lease railcars and storage tanks to customers of our terminalling facilities to meet their logistical needs for the movement of crude oil to refineries and market centers. The general terms of our lease agreements require monthly payments, some of which include variable payments attributable to index-based rate escalations and freight associated with railcar returns. Under the master service agreements for the railcars we lease, we also charge a fee for the various freight monitoring, scheduling, maintenance and related services we provide to customers that lease railcars from us, representing a non-lease component that we account for separately. Our storage tank leases contain standard renewal options for periods up to 12 months following the end of the initial lease term. Additionally, our storage tank leases include charges for blending and mixing services as well as pump over charges, representing non lease components that we account for separately. Our railcar master fleet services agreements and storage tank leases do not generally include rights to early termination of the agreements, nor do they include residual value guarantees. None of the customers on our railcar master fleet services agreements and storage tank leases have options to purchase the underlying assets. As discussed above under Lessee Accounting, we effectively sublease all of our leased railcars to customers under terms similar to the terms of our lease agreements with the railcar manufacturing and finance companies from whom we lease the railcars. We also lease a storage tank from a third party provider of crude oil storage that we sublease to a customer of our Stroud terminal.
We deem a contract to be a lease when the terms of the agreement indicate we have transferred to another party the right to control the use of an identified asset for a period of time in exchange for consideration. We determine that we have transferred the right to control the use of an identified asset when the contract terms set forth the rights of another party to obtain substantially all of the economic benefits from use of the identified asset, or to direct its use throughout the contract period. We consider substantially all of the economic benefits to mean 90% or more of the utility of the identified asset during the contract term.
We allocate consideration in a contract between lease and non-lease components based upon the rates and terms that are specified in our agreements. We recognize revenue from fees we charge for freight services related to railcars and from fees we charge for blending, mixing and pump over charges related to our storage services pursuant to the requirements of ASC 606 as set forth in our Revenue Policy.
We continue to depreciate property that we own and lease to third party customers in accordance with our standard depreciation policies. We record lease income typically on a straight-line basis over the lease term.
Refer to Note 7. Leases for further discussion.


10



Recent Accounting Pronouncements Not Yet Adopted
Intangibles - Goodwill and Other
In January 2017, the FASB issued Accounting Standards Update No. 2017-04, or ASU 2017-04, which amends ASC Topic 350 to modify the concept of impairment from the condition that exists when the carrying amount of goodwill exceeds its implied fair value to the condition that exists when the carrying amount of a reporting unit exceeds its fair value. Pursuant to the provisions of ASU 2017-04, an entity will no longer determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Rather, an entity will recognize an impairment loss for the amount by which the carrying amount of a reporting unit exceeds the reporting unit’s fair value. However, the loss recognized cannot exceed the total amount of goodwill allocated to that reporting unit.
The pronouncement is effective for fiscal years beginning after December 15, 2019, or for any interim impairment testing within those fiscal years and is required to be applied prospectively, with early adoption permitted. We do not expect to early adopt the provisions of this standard. Any impairment assessment we perform subsequent to our adoption of the standard could produce an impairment of goodwill in a different amount than would result under current guidance to the extent the carrying amount of a reporting unit exceeds its fair value.

3. NET INCOME PER LIMITED PARTNER INTEREST
We allocate our net income among our general partner and limited partners using the two-class method in accordance with applicable authoritative accounting guidance. Under the two-class method, we allocate our net income and any net income in excess of distributions to our limited partners, our general partner and the holder of the incentive distribution rights, or IDRs, according to the distribution formula for available cash as set forth in our partnership agreement. We allocate any distributions in excess of earnings for the period to our limited partners and general partner based on their respective proportionate ownership interests in us, as set forth in our partnership agreement after taking into account distributions to be paid with respect to the IDRs. The formula for distributing available cash as set forth in our partnership agreement is as follows:
Distribution Targets
 
Portion of Quarterly
Distribution Per Unit
 
Percentage Distributed to Limited Partners
 
Percentage Distributed to
General Partner
(including IDRs) (1)
Minimum Quarterly Distribution
 
Up to $0.2875
 
98%
 
2%
First Target Distribution
 
> $0.2875 to $0.330625
 
98%
 
2%
Second Target Distribution
 
> $0.330625 to $0.359375
 
85%
 
15%
Third Target Distribution
 
> $0.359375 to $0.431250
 
75%
 
25%
Thereafter
 
Amounts above $0.431250
 
50%
 
50%
    
(1) 
Assumes our general partner maintains a 2% general partner interest in us.


11



We determined basic and diluted net income per limited partner unit as set forth in the following tables:
 
 
For the Three Months Ended September 30, 2019
 
 
Common
Units
 
Subordinated
Units
 
Class A
Units
 (7) 
 
General
Partner
Units
 
Total
 
 
(in thousands, except per unit amounts)
Net income attributable to general and limited partner interests in USD Partners LP (1) 
 
$
1,739

 
$
149

 
$

 
$
218

 
$
2,106

Less: Distributable earnings (2)
 
9,400

 
806

 

 
359

 
10,565

Distributions in excess of earnings
 
$
(7,661
)
 
$
(657
)
 
$

 
$
(141
)
 
$
(8,459
)
Weighted average units outstanding (3)
 
24,411

 
2,093

 

 
461

 
26,965

Distributable earnings per unit (4)
 
$
0.39

 
$
0.39

 
$

 
 
 
 
Overdistributed earnings per unit (5)
 
(0.31
)
 
(0.31
)
 

 
 
 
 
Net income per limited partner unit (basic and diluted)(6)
 
$
0.08

 
$
0.08

 
$

 
 
 
 
    
(1) 
Represents net income allocated to each class of units based on the actual ownership of the Partnership during the period. The net income for each class of limited partner interest has been reduced by its proportionate amount of the approximate $181 thousand attributed to the general partner for its incentive distribution rights.
(2) 
Represents the distributions payable for the period based upon the quarterly distribution amount of $0.3675 per unit, or $1.47 per unit on an annualized basis. Amounts presented for each class of units include a proportionate amount of the $474 thousand distributable to holders of the Equity classified Phantom Units pursuant to the distribution equivalent rights granted under the USD Partners LP 2014 Amended and Restated Long-Term Incentive Plan.
(3) 
Represents the weighted average units outstanding for the period.
(4) 
Represents the total distributable earnings divided by the weighted average number of units outstanding for the period.
(5) 
Represents the distributions in excess of earnings divided by the weighted average number of units outstanding for the period.
(6) 
Our computation of net income per limited partner unit excludes the effects of 1,290,558 equity-classified phantom unit awards outstanding as they were anti-dilutive for the period presented.
(7) 
In February 2019, pursuant to the terms set forth in our partnership agreement, the fourth and final vesting tranche of 38,750 Class A units vested and were converted into Common units. Refer to Note 17. Partners Capital for more information.
 
 
For the Three Months Ended September 30, 2018
 
 
Common
Units
 
Subordinated
Units
 
Class A
Units
 
General
Partner
Units
 
Total
 
 
(in thousands, except per unit amounts)
Net income attributable to general and limited partner interests in USD Partners LP (1) 
 
$
4,794

 
$
916

 
$
9

 
$
209

 
$
5,928

Less: Distributable earnings (2)
 
8,200

 
1,566

 
14

 
280

 
10,060

Distributions in excess of earnings
 
$
(3,406
)
 
$
(650
)
 
$
(5
)
 
$
(71
)
 
$
(4,132
)
Weighted average units outstanding (3)
 
21,915

 
4,185

 
39

 
461

 
26,600

Distributable earnings per unit (4)
 
$
0.37

 
$
0.37

 
$
0.36

 
 
 
 
Overdistributed earnings per unit (5)
 
(0.16
)
 
(0.16
)
 
(0.13
)
 
 
 
 
Net income per limited partner unit (basic and diluted)(6)
 
$
0.21

 
$
0.21

 
$
0.23

 
 
 
 
    
(1) 
Represents net income allocated to each class of units based on the actual ownership of the Partnership during the period. The net income for each class of limited partner interest has been reduced by its proportionate amount of the approximate $107 thousand attributed to the general partner for its incentive distribution rights.
(2) 
Represents the distributions paid for the period based upon the quarterly distribution amount of 0.3575 per unit, or $1.43 per unit on an annualized basis. Amounts presented for each class of units include a proportionate amount of the $443 thousand distributed to holders of the Equity-classified Phantom Units pursuant to the distribution equivalent rights granted under the USD Partners Amended and Restated LP 2014 Long-Term Incentive Plan.
(3) 
Represents the weighted average units outstanding for the period.
(4) 
Represents the total distributable earnings divided by the weighted average number of units outstanding for the period.
(5) 
Represents the distributions in excess of earnings divided by the weighted average number of units outstanding for the period.
(6) 
Our computation of net income per limited partner unit excludes the effects of 1,239,488 equity-classified phantom unit awards outstanding as they were anti-dilutive for the period presented.


12



 
 
For the Nine Months Ended September 30, 2019
 
 
Common
Units
 
Subordinated
Units
 
Class A
Units
 (7) 
 
General
Partner
Units
 
Total
 
 
(in thousands, except per unit amounts)
Net income attributable to general and limited partner interests in USD Partners LP (1) 
 
$
3,506

 
$
311

 
$

 
$
559

 
$
4,376

Less: Distributable earnings (2)
 
28,010

 
2,402

 

 
1,012

 
31,424

Distributions in excess of earnings
 
$
(24,504
)
 
$
(2,091
)
 
$

 
$
(453
)
 
$
(27,048
)
Weighted average units outstanding (3)
 
23,965

 
2,476

 
7

 
461

 
26,909

Distributable earnings per unit (4)
 
$
1.17

 
$
0.97

 
$

 
 
 
 
Overdistributed earnings per unit (5)
 
(1.02
)
 
(0.84
)
 

 
 
 
 
Net income per limited partner unit (basic and diluted)(6)
 
$
0.15

 
$
0.13

 
$

 
 
 
 
    
(1) 
Represents net income allocated to each class of units based on the actual ownership of the Partnership during the period. The net income for each class of limited partner interest has been reduced by its proportionate amount of the approximate $483 thousand attributed to the general partner for its incentive distribution rights.
(2) 
Represents the per unit distributions paid of $0.3625 per unit for the three months ended March 31, 2019, the per unit distribution of $0.365 per unit for the three months ended June 30, 2019, and the per unit distributable of $0.3675 for the three months ended September 30, 2019, representing a year-to-date distribution amount of $1.095 per unit. Amounts presented for each class of units include a proportionate amount of the $940 thousand distributed and $474 thousand distributable to holders of the Equity classified Phantom Units pursuant to the distribution equivalent rights granted under the USD Partners LP 2014 Amended and Restated Long-Term Incentive Plan.
(3) 
Represents the weighted average units outstanding for the period.
(4) 
Represents the total distributable earnings divided by the weighted average number of units outstanding for the period.
(5) 
Represents the distributions in excess of earnings divided by the weighted average number of units outstanding for the period.
(6) 
Our computation of net income per limited partner unit excludes the effects of 1,290,558 equity-classified phantom unit awards outstanding as they were anti-dilutive for the period presented.
(7) 
In February 2019, pursuant to the terms set forth in our partnership agreement, the fourth and final vesting tranche of 38,750 Class A units vested and were converted into Common units. Refer to Note 17. Partners Capital for more information.
 
 
For the Nine Months Ended September 30, 2018
 
 
Common
Units
 
Subordinated
Units
 
Class A
Units
 
General
Partner
Units
 
Total
 
 
(in thousands, except per unit amounts)
Net income attributable to general and limited partner interests in USD Partners LP (1) 
 
$
15,337

 
$
3,246

 
$
33

 
$
624

 
$
19,240

Less: Distributable earnings (2)
 
24,432

 
4,665

 
42

 
805

 
29,944

Distributions in excess of earnings
 
$
(9,095
)
 
$
(1,419
)
 
$
(9
)
 
$
(181
)
 
$
(10,704
)
Weighted average units outstanding (3)
 
21,480

 
4,569

 
46


461

 
26,556

Distributable earnings per unit (4)
 
$
1.14

 
$
1.02

 
$
0.91

 
 
 
 
Overdistributed earnings per unit (5)
 
(0.42
)
 
(0.31
)
 
(0.20
)
 
 
 
 
Net income per limited partner unit (basic and diluted)(6)
 
$
0.72

 
$
0.71

 
$
0.71

 
 
 
 
    
(1) 
Represents net income allocated to each class of units based on the actual ownership of the Partnership during the period. The net income for each class of limited partner interest has been reduced by its proportionate amount of the approximate $291 thousand attributed to the general partner for its incentive distribution rights.
(2) 
Represents the distributions paid for the period based upon the quarterly distribution amount of $0.3525 per unit for the three months ended March 31, 2018 and $0.355 per unit for the three months ended June 30, 2018, and $0.3575 per unit for the three months ended September 30, 2018, representing a year-to-date distribution amount of $1.065 per unit. Amounts presented for each class of units include a proportionate amount of the $1.3 million distributed to holders of the Equity-classified Phantom Units pursuant to the distribution equivalent rights granted under the USD Partners Amended and Restated LP 2014 Long-Term Incentive Plan.
(3) 
Represents the weighted average units outstanding for the period.
(4) 
Represents the total distributable earnings divided by the weighted average number of units outstanding for the period.
(5) 
Represents the distributions in excess of earnings divided by the weighted average number of units outstanding for the period.
(6) 
Our computation of net income per limited partner unit excludes the effects of 1,239,488 equity-classified phantom unit awards outstanding as they were anti-dilutive for the period presented.
 


13



4. REVENUES
Disaggregated Revenues
We manage our business in two reportable segments: Terminalling services and Fleet services. Our segments offer different services and are managed accordingly. Our chief operating decision maker, or CODM, regularly reviews financial information about both segments in order to allocate resources and evaluate performance. As such, we have concluded that disaggregating revenue by reporting segments appropriately depicts how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors. Refer to Note 14. Segment Reporting for our disaggregated revenues by segment. Additionally, the below tables summarize the geographic data for our revenues:
 
Three Months Ended September 30, 2019
 
U.S.
 
Canada
 
Total
 
(in thousands)
Third party
$
7,963

 
$
16,068

 
$
24,031

Related party
$
2,320

 
$
3,543

 
$
5,863

 
Three Months Ended September 30, 2018
 
U.S.
 
Canada
 
Total
 
(in thousands)
Third party
$
10,802

 
$
11,858

 
$
22,660

Related party
$
2,199

 
$
4,727

 
$
6,926


 
Nine Months Ended September 30, 2019
 
U.S.
 
Canada
 
Total
 
(in thousands)
Third party
$
25,405

 
$
39,163

 
$
64,568

Related party
$
6,902

 
$
12,607

 
$
19,509

 
Nine Months Ended September 30, 2018
 
U.S.
 
Canada
 
Total
 
(in thousands)
Third party
$
33,970

 
$
35,875

 
$
69,845

Related party
$
5,013

 
$
14,038

 
$
19,051

Remaining Performance Obligations
The transaction price allocated to the remaining performance obligations associated with our terminalling and fleet services agreements as of September 30, 2019 are as follows for the periods indicated:
 
For the three months ending December 31, 2019
 
2020
 
2021
 
2022
 
Thereafter
 
Total
 
(in thousands)
Terminalling Services (1) (2)
$
24,846

 
$
80,211

 
$
65,523

 
$
57,431

 
$
39,078

 
$
267,089

Fleet Services
712

 
1,030

 
1,016

 
1,267

 
41

 
4,066

Total
$
25,558

 
$
81,241

 
$
66,539

 
$
58,698

 
$
39,119

 
$
271,155

    
(1) The majority of our terminalling services agreements are denominated in Canadian dollars. We have converted the remaining performance obligations provided herein using the year-to-date average exchange rate of 0.7524 U.S. dollars per one Canadian dollar at September 30, 2019.
(2) Includes fixed monthly minimum commitment fees per contracts and excludes constrained variable consideration for rate-escalations associated with an index, such as the consumer price index, as well as any incremental revenue associated with volume activity above the minimum volumes set forth within the contracts.
We have applied the practical expedient that allows us to exclude disclosure of performance obligations that are part of a contract that has an expected duration of one year or less. In addition, we have also applied the practical


14



expedient that allows us not to disclose the amount of transaction price allocated to the remaining performance obligations for all reporting periods presented prior to our adoption of ASC 606.
Contract Assets
Our contract assets represent cumulative revenue that has been recognized in advance of billing the customer due to tiered billing provisions. In such arrangements, revenue is recognized using a blended rate based on the billing tiers of the agreement, as the services are consistently provided throughout the duration of the contractual arrangement. We have included contract assets of $257 thousand and $68 thousand as of September 30, 2019 and December 31, 2018, respectively, in “Other current assets” and $171 thousand as of December 31, 2018, in “Other non-current assets” on our consolidated balance sheets. In addition we have included contract assets of $389 thousand as of September 30, 2019 in “Other current assets related party” on our consolidated balance sheets.
Contract Liabilities
Our contract liabilities consist of amounts collected in advance from customers associated with their terminalling and fleet services agreements and deferred revenues associated with make-up rights, which will be recognized as revenue when earned pursuant to the terms of our contractual arrangements. We currently recognize substantially all of the amounts we receive for minimum volume commitments as revenue when collected, since breakage associated with these make-up rights options is approximately between 97% and 99% based on our experience and expectations around usage of these options. We deferred $1.1 million in revenues at September 30, 2019 for estimated breakage associated with the make-up rights options we granted to our customers, which we included in “Deferred revenue” on our consolidated balance sheets. We also have other contract liabilities that represent cumulative revenue that has been deferred due to tiered billing provisions. In such arrangements, revenue is recognized using a blended rate based on the billing tiers of the agreement, as the services are consistently provided throughout the duration of the contractual arrangement, which we included in “Other non-current liabilities” on our consolidated balance sheets.
We have included contract liabilities with third-party customers of $6.0 million and $2.9 million as of September 30, 2019 and December 31, 2018, respectively, in “Deferred revenue.” We have included contract liabilities with related party customers of $1.1 million and $1.5 million as of September 30, 2019 and December 31, 2018, respectively, in “Deferred revenue related party” on our consolidated balance sheets. We have also included contract liabilities of $1.7 million as of September 30, 2019 and none at December 31, 2018 with third-party customers in “Other non-current liabilities” on our consolidated balance sheets.
The following table presents the changes associated with the balance of our contract liabilities for the nine months ended September 30, 2019:
 
 
December 31, 2018
 
Cash Additions for Customer Prepayments
 
Revenue Recognized
 
September 30, 2019
 
 
(in thousands)
Customer prepayments
 
$
2,921

 
$
6,016

 
$
(2,921
)
 
$
6,016

Customer prepayments — related party (1)
 
$
1,475

 
$
1,054

 
$
(1,475
)
 
$
1,054

Other contract liabilities
 
$

 
$
1,667

 
$

 
$
1,667

    
(1) 
Includes contract liabilities associated with customer prepayments from related parties. Refer to Note 12. Transactions with Related Parties for additional discussion of deferred revenues associated with related parties.
Deferred Revenue Fleet Leases
Our deferred revenue also includes advance payments from customers of our Fleet services business, which will be recognized as Fleet leases revenue when earned pursuant to the terms of our contractual arrangements. We have likewise prepaid the rent on railcar leases that are associated with the deferred revenues of our fleet services business, which we will recognize as expense concurrently with our recognition of the associated revenue. We have included $0.4 million at September 30, 2019 and December 31, 2018, in “Deferred revenue related party” on our consolidated balance sheets associated with customer prepayments for our fleet lease agreements.
 


15



5. RESTRICTED CASH
We include in restricted cash amounts representing a cash account for which the use of funds is restricted by a facilities connection agreement among us and Gibson Energy Inc., or Gibson, that we entered into during 2014 in connection with the development of our Hardisty terminal. The collaborative arrangement is further discussed in Note 10. Collaborative Arrangement.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within our consolidated balance sheets to the amounts shown in our consolidated statements of cash flows for the specified periods:
 
September 30,
 
2019
 
2018
 
(in thousands)
Cash and cash equivalents
$
6,479

 
$
7,361

Restricted Cash
7,644

 
5,834

Total cash, cash equivalents and restricted cash
$
14,123

 
$
13,195

 
6. PROPERTY AND EQUIPMENT
Our property and equipment is comprised of the following as of the dates indicated:
 
September 30, 2019
 
December 31, 2018
Estimated
Depreciable Lives
(Years)
 
(in thousands)
Land
$
10,087

 
$
10,004

N/A
Trackage and facilities
124,907

 
123,080

10-30
Pipeline
16,366

 
16,336

20-25
Equipment
16,709

 
16,455

3-20
Furniture
65

 
64

5-10
Total property and equipment
168,134

 
165,939

 
Accumulated depreciation
(36,384
)
 
(29,479
)
 
Construction in progress (1)
16,794

 
8,848

 
Property and equipment, net
$
148,544

 
$
145,308

 
        
(1) 
The amounts classified as “Construction in progress” are excluded from amounts being depreciated. These amounts represent property that is not yet ready to be placed into productive service as of the respective consolidated balance sheet date. We had $170 thousand and $439 thousand of capitalized interest costs for the three and nine months ended September 30, 2019, respectively, and none for the same periods in 2018.
Depreciation expense associated with Property and equipment totaled $2.1 million for the three months ended September 30, 2019 and 2018, and $5.9 million and $6.4 million for the nine months ended September 30, 2019 and 2018, respectively.
Our depreciation expense for the nine months ended September 30, 2019 reflects a reduction of $0.6 million to our asset retirement obligations, or ARO, due to refinement of our estimates. The ARO is associated with restoration of the property at our San Antonio facility. The ending balance of our ARO at September 30, 2019 is $0.2 million and is recorded as “Other current liabilities” on our consolidated balance sheets.
 


16



7. LEASES
We have noncancellable operating leases for railcars, buildings, storage tanks, offices, railroad tracks, and land.
 
 
Nine Months Ended September 30, 2019
Weighted-average discount rate
 
6.4
%
Weighted average remaining lease term in years
 
2.96

Our total lease cost consisted of the following items for the dates indicated:
 
 
Three Months Ended September 30, 2019
 
Nine Months Ended September 30, 2019
 
(in thousands)
Operating lease cost
 
$
1,483

 
$
4,451

Short term lease cost
 
48

 
147

Sublease income
 
(1,332
)
 
(4,002
)
Total
 
$
199

 
$
596

The maturity analysis below presents the undiscounted cash payments we expect to make each period for property that we lease from others under noncancellable operating leases as of September 30, 2019 (in thousands): 
2019
$
1,520

2020
5,269

2021
4,074

2022
3,787

2023
20

Thereafter

Total lease payments
$
14,670

Less: imputed interest
(1,320
)
Present value of lease liabilities
$
13,350

We serve as an intermediary to assist our customers with obtaining railcars. In connection with our leasing of railcars from third parties, we simultaneously enter into lease agreements with our customers for noncancellable terms that are designed to recover our costs associated with leasing the railcars plus a fee for providing this service. In addition to these leases we also have lease income from storage tanks.
 
Three Months Ended September 30, 2019
 
Nine Months Ended September 30, 2019
 
(in thousands, except weighted average term)
Lease income
$
2,363

 
$
7,512

Weighted average remaining lease term in years
 
 
3.03

The maturity analysis below presents the undiscounted future minimum lease payments we expect to receive from customers each period for property they lease from us under noncancellable operating leases as of September 30, 2019 (in thousands): 
2019
$
1,988

2020
6,895

2021
5,752

2022
4,639

Total
$
19,274



17



Refer to Note 2. Recent Accounting Pronouncements for additional discussion of our lease policies.

8. GOODWILL AND INTANGIBLE ASSETS
Goodwill
Goodwill represents the excess of the purchase price of an entity over the estimated fair value of the assets acquired and liabilities assumed. Our goodwill originated from our acquisition of the Casper terminal, which is included in our Terminalling services segment. As of September 30, 2019, the carrying amount of our goodwill was $33.6 million.
We test goodwill for impairment annually based on the carrying values of our reporting units on the first day of the third quarter of each year or more frequently if events or changes in circumstances suggest that the fair value of a reporting unit is less than its carrying value. During the third quarter of 2019, we completed our annual goodwill impairment analysis and determined that the fair value of the Casper terminal reporting unit exceeded its carrying value at July 1, 2019. An impairment charge would have resulted if our estimate of the fair value of the Casper terminal reporting unit was approximately 5% less than the amount determined. The critical assumptions used in our analysis include the following:
(1)
A weighted average cost of capital of 11%;
(2)
A capital structure consisting of approximately 40% debt and 60% equity;
(3)
A range of EBITDA multiples derived from equity prices of public companies with similar operating and investment characteristics, from 8.25x to 9.25x;
(4)
A range of EBITDA multiples for transactions based on actual sales and purchases of comparable businesses, from 9.0x to 10.0x; and
(5) A range of incremental volumes expected at our Casper terminal of approximately 20,000 to 40,000 bpd for terminalling and storage services resulting from the anticipated successful completion of the Enbridge DRA project in the first quarter of 2020.
We measured the fair value of our Casper terminal reporting unit by using an income analysis, market analysis and transaction analysis with weightings of 50%, 25% and 25%, respectively. Our estimate of fair value required us to use significant unobservable inputs representative of a Level 3 fair value measurement, including assumptions related to the future performance of our Casper terminal. We have not observed any events or circumstances subsequent to our analysis that would suggest the fair value of our Casper terminal is below its carrying amount as of September 30, 2019.
Intangible Assets
The composition, gross carrying amount and accumulated amortization of our identifiable intangible assets are as follows as of the dates indicated:
 
September 30, 2019
 
December 31, 2018
 
(in thousands)
Carrying amount:
 
 
 
Customer service agreements
$
125,960

 
$
125,960

Other
106

 
106

Total carrying amount
126,066

 
126,066

Accumulated amortization:
 
 
 
Customer service agreements
(48,775
)
 
(39,328
)
Other
(41
)
 
(33
)
Total accumulated amortization
(48,816
)
 
(39,361
)
Total intangible assets, net
$
77,250

 
$
86,705


We determined the expiration of a customer contract for terminal services at our Casper terminal was an event that required us to evaluate our Casper terminal asset group for impairment. Our projections of the undiscounted cash flows expected to be derived from the operation and disposition of the Casper terminal asset group exceeded the carrying value of the asset group as of August 31, 2019, the date of our evaluation, indicating cash flows were expected to be sufficient to recover the carrying value of the Casper terminal asset group. No further triggering events were identified through September 30, 2019.


18



Amortization expense associated with intangible assets totaled $3.2 million for each of the three months ended September 30, 2019 and 2018 and $9.5 million for each of the nine months ended September 30, 2019 and 2018.

9. DEBT
In November 2018, we amended and restated our senior secured credit agreement, which we originally established at the time of our initial public offering in October 2014. We refer to the amended and restated senior secured credit agreement executed in November 2018 as the Credit Agreement and the original senior secured credit agreement as the Previous Credit Agreement. Our Credit Agreement is a $385 million revolving credit facility (subject to limits set forth therein) with Citibank, N.A., as administrative agent, and a syndicate of lenders. Our Credit Agreement amends and restates in its entirety our Previous Credit Agreement.
Our Credit Agreement is a four year committed facility that initially matures on November 2, 2022. Our Credit Agreement provides us with the ability to request two one-year maturity date extensions, subject to the satisfaction of certain conditions, and allows us the option to increase the maximum amount of credit available up to a total facility size of $500 million, subject to receiving increased commitments from lenders and satisfaction of certain conditions.
Our Credit Agreement and any issuances of letters of credit are available for working capital, capital expenditures, general partnership purposes and continue the indebtedness outstanding under the Previous Credit Agreement. The Credit Agreement includes an aggregate $20 million sublimit for standby letters of credit and a $20 million sublimit for swingline loans. Obligations under the Credit Agreement are guaranteed by our restricted subsidiaries (as such term is defined therein) and are secured by a first priority lien on our assets and those of our restricted subsidiaries, other than certain excluded assets.
Our long-term debt balances included the following components as of the specified dates:
 
September 30, 2019
 
December 31, 2018
 
(in thousands)
Revolving Credit Facility
$
216,000

 
$
209,000

Less: Deferred financing costs, net
(2,556
)
 
(3,419
)
Total long-term debt, net
$
213,444

 
$
205,581

We determined the capacity available to us under the terms of our Credit Agreement was as follows as of the specified dates:
 
September 30, 2019
 
December 31, 2018
 
(in millions)
Aggregate borrowing capacity under Credit Agreement
$
385.0

 
$
385.0

Less: Revolving Credit Facility amounts outstanding
216.0

 
209.0

Letters of credit outstanding

 
0.6

Available under Credit Agreement (1)
$
169.0

 
$
175.4

    
(1) 
Pursuant to the terms of our Credit Agreement, our borrowing capacity, currently, is limited to 4.5 times our trailing 12-month consolidated EBITDA, which equates to approximately $37 million of availability at September 30, 2019.
The average interest rate on our outstanding indebtedness was 4.80% and 4.86% at September 30, 2019 and December 31, 2018, respectively, without consideration to the effect of our derivative contracts. In addition to the interest we incur on our outstanding indebtedness, we pay commitment fees of 0.50% on unused commitments, which rate will vary based on our consolidated net leverage ratio, as defined in our Credit Agreement. At September 30, 2019, we were in compliance with the covenants set forth in our Credit Agreement.


19



Interest expense associated with our outstanding indebtedness was as follows for the specified periods:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
(in thousands)
Interest expense on the Credit Agreement
$
2,967

 
$
2,611

 
$
8,748

 
$
7,379

Capitalized interest on construction in progress
(170
)
 

 
(439
)
 

Amortization of deferred financing costs
208

 
216

 
865

 
646

Total interest expense
$
3,005

 
$
2,827

 
$
9,174

 
$
8,025

 
10. COLLABORATIVE ARRANGEMENT
We entered into a facilities connection agreement in 2014 with Gibson under which Gibson developed, constructed and operates a pipeline and related facilities connected to our Hardisty terminal. Gibson’s storage terminal is the exclusive means by which our Hardisty terminal receives crude oil. Subject to certain limited exceptions regarding manifest train facilities, our Hardisty terminal is the exclusive means by which crude oil from Gibson’s Hardisty storage terminal may be transported by rail. We remit pipeline fees to Gibson for the transportation of crude oil to our Hardisty terminal based on a predetermined formula. Pursuant to our arrangement with Gibson, we incurred pipeline fees of $5.4 million and $5.3 million for the three months ended September 30, 2019 and 2018, respectively, and $15.4 million and $16.1 million for the nine months ended September 30, 2019 and 2018, respectively, which are presented as “Pipeline fees” in our consolidated statements of income.
 
11. NONCONSOLIDATED VARIABLE INTEREST ENTITIES
We have entered into purchase, assignment and assumption agreements to assign payment and performance obligations for certain operating lease agreements with lessors, as well as customer fleet service payments related to these operating leases, with unconsolidated entities in which we have variable interests. These variable interest entities, or VIEs, include LRT Logistics Funding LLC, USD Fleet Funding LLC, USD Fleet Funding Canada Inc., and USD Logistics Funding Canada Inc. We treat these entities as variable interests under the applicable accounting guidance due to their having an insufficient amount of equity invested at risk to finance their activities without additional subordinated financial support. We are not the primary beneficiary of the VIEs, as we do not have the power to direct the activities that most significantly affect the economic performance of the VIEs, nor do we have the power to remove the managing member under the terms of the VIEs’ limited liability company agreements. Accordingly, we do not consolidate the results of the VIEs in our consolidated financial statements.
The following table summarizes the total assets and liabilities between us and the VIEs as reflected in our consolidated balance sheets at September 30, 2019 and December 31, 2018, as well as our maximum exposure to losses from entities in which we have a variable interest, but are not the primary beneficiary. Generally, our maximum exposure to losses is limited to amounts receivable for services we provided, reduced by any deferred revenue.
 
September 30, 2019
 
Total assets
 
Total liabilities
 
Maximum exposure to loss
 
(in thousands)
Accounts receivable
$
11

 
$

 
$
1

Deferred revenue

 
10

 

 
$
11

 
$
10

 
$
1



20



 
December 31, 2018
 
Total assets
 
Total liabilities
 
Maximum exposure to loss
 
(in thousands)
Accounts receivable
$
17

 
$

 
$
7

Deferred revenue

 
10

 

 
$
17

 
$
10

 
$
7

We have assigned certain payment and performance obligations under the leases and master fleet service agreements for 1,483 railcars to the VIEs, but we have retained certain rights and obligations with respect to the servicing of these railcars.
During the quarter ended September 30, 2019, we provided no explicit or implicit financial or other support to these VIEs that were not previously contractually required.
 
12. TRANSACTIONS WITH RELATED PARTIES
Nature of Relationship with Related Parties
USD is engaged in designing, developing, owning and managing large-scale multi-modal logistics centers and other energy-related infrastructure across North America. USD is also the sole owner of USDG and the ultimate parent of our general partner. USD is owned by Energy Capital Partners, Goldman Sachs and certain members of its management.
USDG is the sole owner of our general partner and at September 30, 2019, owns 9,464,381 of our common units and all 2,092,709 of our subordinated units representing a combined 42.9% limited partner interest in us. As of September 30, 2019, a value of up to $10.0 million of these common units were pledged as collateral under USDG’s letter of credit facility. USDG also provides us with general and administrative support services necessary for the operation and management of our business.
USD Partners GP LLC, our general partner, currently owns all 461,136 of our general partner units representing a 1.7% general partner interest in us, as well as all of our incentive distribution rights. Pursuant to our partnership agreement, our general partner is responsible for our overall governance and operations.
USD Marketing LLC, or USDM, is a wholly-owned subsidiary of USDG organized to promote contracting for services provided by our terminals and to facilitate the marketing of customer products.
USD Terminals Canada II ULC, or USDTC II, is an indirect, wholly-owned Canadian subsidiary of USDG, organized for the purposes of pursuing expansion and other development opportunities associated with our Hardisty Terminal, pursuant to the Development Rights and Cooperation agreement between our wholly-owned subsidiary USD Terminals Canada ULC, or USDTC, and USDG. USDTC owns the legacy crude oil loading facility we refer to as the Hardisty terminal. USDTC II completed construction of the Hardisty South expansion (“Hardisty South”) which commenced operations in January 2019. Hardisty South, which is owned and operated by USDTC II, added one120-railcar unit train of transloading capacity per day, or approximately 75,000 barrels per day, of takeaway capacity to the terminal by modifying the existing loading rack and building additional infrastructure and trackage.
Omnibus Agreement
We are party to an omnibus agreement with USD, USDG and certain of their subsidiaries, including our general partner, pursuant to which we obtain and make payments for specified services provided to us and for out-of-pocket costs incurred on our behalf. We pay USDG, in equal monthly installments, the annual amount USDG estimates will be payable by us during the calendar year for providing services for our benefit. The omnibus agreement provides that this amount may be adjusted annually to reflect, among other things, changes in the scope of the general and administrative services provided to us due to a contribution, acquisition or disposition of assets by us or our subsidiaries, or for changes in any law, rule or regulation applicable to us, which affects the cost of providing the general and administrative services. We also reimburse USDG for any out-of-pocket costs and expenses incurred on our behalf in


21



providing general and administrative services to us. This reimbursement is in addition to the amounts we pay to reimburse our general partner and its affiliates for certain costs and expenses incurred on our behalf for managing our business and operations, as required by our partnership agreement.
The total amounts charged to us under the omnibus agreement for the three months ended September 30, 2019 and 2018 were $1.4 million and $1.9 million, respectively, and for the nine months ended September 30, 2019 and 2018 were $6.1 million and $5.6 million, respectively, which amounts are included in “Selling, general and administrative — related party” in our consolidated statements of income. At September 30, 2019 and December 31, 2018, we had balances payable related to these costs of $0.4 million recorded as “Accounts payable and accrued expenses related party” in our consolidated balance sheets.
Marketing Services Agreement
In connection with our purchase of the Stroud terminal, we entered into a Marketing Services Agreement with USDM, in May 2017, whereby we granted USDM the right to market the capacity at the Stroud terminal in excess of the original capacity of our initial customer in exchange for a nominal per barrel fee. USDM is obligated to fund any related capital costs associated with increasing the throughput or efficiency of the terminal to handle additional throughput. Upon expiration of our contract with the initial Stroud customer in June 2020, the same marketing rights will apply to all throughput at the Stroud terminal in excess of the throughput necessary for the Stroud terminal to generate Adjusted EBITDA that is at least equal to the average monthly Adjusted EBITDA derived from the initial Stroud customer during the 12 months prior to expiration. We also granted USDG the right to develop other projects at the Stroud terminal in exchange for the payment to us of market-based compensation for the use of our property for such development projects. Any such development projects would be wholly-owned by USDG and would be subject to our existing right of first offer with respect to midstream projects developed by USDG. Payments made under the Marketing Services Agreement during the periods presented in this report are discussed below under the heading “Related Party Revenue and Deferred Revenue.”  
Hardisty Terminal Services Agreement
We entered into a terminal services agreement with USDTC II during the third quarter of 2019, whereby Hardisty South will provide terminalling services for a third-party customer of our Hardisty terminal for contracted capacity that exceeds the transloading capacity currently available, if needed. We incurred expenses pursuant to this arrangement of $2.5 million for the three and nine months ended September 30, 2019, which amounts are included in “Operating and maintenance expense related party” in our consolidated statements of income. These costs represent the same rate, on a per barrel basis, that we received as revenue from our third-party customer, which is included in “Terminalling Services” revenue in our consolidated statements of income.
Hardisty Shared Facilities Agreement
USDTC facilitates the provision of services on behalf of USDTC II pursuant to the terms of a shared facilities agreement, which includes all subcontracted railcar loading, operating, maintenance, pipeline and management services for the entire Hardisty terminal, including Hardisty South owned by USDTC II, and passes through a proportionate amount of the cost of such services to USDTC II. Our financial statements only reflect the cost incurred by USDTC.
Related Party Revenue and Deferred Revenue
We have agreements to provide terminalling and fleet services for USDM with respect to our Hardisty terminal and terminalling services with respect to our Stroud terminal, which also include reimbursement to us for certain out-of-pocket expenses we incur.
USDM assumed the rights and obligations for terminalling capacity at our Hardisty terminal from another customer in June 2017 to facilitate the origination of crude oil barrels by the Stroud customer from our Hardisty terminal for delivery to the Stroud terminal. As a result of USDM assuming these rights and obligations, and in order to accommodate the needs of the Stroud customer, the contracted term for the capacity held by USDM at our Hardisty terminal was extended from June 30, 2019 to June 30, 2020. USDM controls approximately 25% of the available monthly capacity of the Hardisty terminal at September 30, 2019. The terms and conditions of these agreements are similar to the terms and conditions of agreements we have with other parties at the Hardisty terminal that are not related to us.
In connection with our purchase of the Stroud terminal, we also entered into a Marketing Services Agreement with USDM, as discussed above. Pursuant to the terms of the agreement, we receive a fixed amount per barrel from


22



USDM in exchange for marketing the additional capacity available at the Stroud terminal. We also received revenue for providing additional terminalling services at our Hardisty terminal to USDM pursuant to the terms of its existing agreements with us. Additionally, effective January 2019, we entered into a six month terminalling services agreement with USDM at our Casper terminal to maximize utilization of available terminalling and storage capacity by offering these services to customers on an uncommitted basis at current market rates. This agreement automatically renews for successive periods of six months on an evergreen basis unless otherwise canceled by either party. We include amounts received pursuant to these arrangements as revenue in the table below under “Terminalling services — related party.” Additionally, we received revenue from USDM for the lease of 200 railcars pursuant to the terms of an existing agreement with us, which is included in the table below under “Fleet leases — related party.”
Our related party revenues from USD and affiliates are presented in the following table for the indicated periods:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
(in thousands)
Terminalling services — related party
$
4,459

 
$
5,715

 
$
15,622

 
$
15,414

Fleet leases — related party
984

 
984

 
2,951

 
2,951

Fleet services — related party
227

 
227

 
682

 
682

Freight and other reimbursables — related party
193

 

 
254

 
4

 
$
5,863

 
$
6,926

 
$
19,509

 
$
19,051

We had the following amounts outstanding with USD and affiliates on our consolidated balance sheets as presented below in the following table for the indicated periods:
 
September 30, 2019
 
December 31, 2018
 
(in thousands)
Accounts receivable — related party 
$
1,689

 
$
624

Accounts payable — related party (1)
$
2,547

 
$
67

Other current and non-current assets — related party (2)
$
503

 
$
174

Deferred revenue — related party (3)
$
1,464

 
$
1,885

        
(1) 
Includes amounts payable to a related party pursuant to the Hardisty Terminal Services Agreement, discussed above, as well as other accounts payable related party amounts associated with our terminalling services business. Does not include amounts payable to related parties associated with the Omnibus Agreement, as discussed above.
(2) 
Represents a contract asset associated with a lease agreement with USDM and cumulative revenue that has been recognized in advance of billing the customer due to tiered billing provisions. Refer to Note 4. Revenue for further discussion.
(3) 
Represents deferred revenues associated with our terminalling and fleet services agreements with USD and affiliates for amounts we have collected from them for their prepaid leases and prepaid minimum volume commitment fees.
Cash Distributions
During the nine months ended September 30, 2019, we paid the following aggregate cash distributions to USDG as a holder of our common units and the sole owner of our subordinated units and to USD Partners GP LLC for its general partner interest and as the holder of our IDRs.
Distribution Declaration Date
 
Record Date
 
Distribution
Payment Date
 
Amount Paid to
 USDG
 
Amount Paid to
USD Partners GP LLC
 
 
 
 
 
 
(in thousands)
January 31, 2019
 
February 11, 2019
 
February 19, 2019
 
$
4,161

 
$
285

April 26, 2019
 
May 7, 2019
 
May 15, 2019
 
$
4,189

 
$
308

July 24, 2019
 
August 6, 2019
 
August 14, 2019
 
$
4,218

 
$
329

 


23



13. COMMITMENTS AND CONTINGENCIES
From time to time, we may be involved in legal, tax, regulatory and other proceedings in the ordinary course of business. We do not believe that we are currently a party to any such proceedings that will have a material adverse impact on our financial condition or results of operations.
 
14. SEGMENT REPORTING
We manage our business in two reportable segments: Terminalling services and Fleet ser